A Tour of Amazon’s 4-Star Store, a Retail Oddity

(Bloomberg) -- As we waited last week for an announcement of the location(s) of Amazon’s much-ballyhooed HQ2, I drove across the Bay Bridge to visit a different kind of Amazon outpost—its new 4-Star Store on Fourth Street in Berkeley, California. Like most things from Amazon, it’s much more than it appears.

4-Star is the newest and strangest entry in Amazon.com Inc.’s lineup of small-format physical retail stores. The company now operates 18 bookstores, a few dozen Amazon Pop-Up stores selling mostly Kindles and Echo speakers and a growing number of Amazon Go cashier-less convenience stores, in addition to nearly 500 Whole Foods Markets in the U.S. and U.K.

Inside, 4-Star has a lot of the same fixtures and furniture as Amazon Books, as well as new flourishes such as dog-tag sized digital screens displaying prices for both Prime and non-Prime members. But it’s designed to be something else entirely—a place to find an eclectic assortment of well-reviewed merchandise from across Amazon’s many product categories.

As I walked into the 4,000-square-foot store in Berkeley, I quickly saw how different it is from anything else in retail. Tables are devoted to vague groupings like “Top Selling Around Berkeley,” “Most Wished For,” “Amazon Exclusives” and “Holiday Deals.” The displays resemble the incongruent jumble of products in Amazon’s own fulfillment centers. Air purifiers sit next to Lego Ideas kits, which sit next to the Echo, a Nintendo Switch controller and the book Fear by Bob Woodward. A selection of more books spans one wall; products grouped into categories like “Candles & Home Décor,” “Bar and Party Supplies” and “Quirky Kitchen Gifts” line the other.

The idea is to use Amazon’s vaunted stockpile of data about purchasing habits to find out what’s well-reviewed and selling briskly, and to tailor that selection to different communities and different seasons. So in Berkeley last week, there were plenty of toys for the holidays, as well as the soundtrack to A Star is Born, books critical of the U.S. president and an Advent calendar. “We built the store so we can be flexible,” says Cameron Janes, Amazon’s vice president of physical retail. He says the inspiration came from the positive reception from customers after Amazon added general merchandise to its bookstores.

The Berkeley 4-Star store is the third of its kind, after two others opened this fall in Manhattan and outside Denver. Aside from the 1-800-Got-Junk truck parked out front (perhaps a rival mischievously parked it there?), the opening seemed like a modest success. Reporters and locals pouring in to check out Amazon’s new curiosity.

But at least some analysts are scratching their heads. The shallow selection of inventory in 4-Star, combined with high commercial real estate prices, suggests it won’t exactly be a geyser of profits. And instead of offering a Costco-like treasure hunt for hard-to-find items that might quickly sell out, everything in the store is easily purchased online. “I don’t think they know what the formula is that works,” says Sucharita Kodali, an analyst at research firm Forrester. She cites challenges at gift store chains like Brookstone and Things Rememberedas a bad omen for 4-Star.

Browsing the store, I wondered whether Amazon’s goal is to sell products or to market the company itself. The space is a prominent billboard for Amazon and its Prime subscription service, a showroom for Alexa devices and a stage for Amazon’s private labels, like Stone & Beam blankets and Rivet lamps. It also functions as a cog in Amazon’s supply chain. Janes says customers who live nearby can return moderately sized products here and that one day it may function as a pickup point for items purchased online.

Perhaps 4-Star can succeed even if, by other retail standards, it flops. We can probably count on two things: that Jeff Bezos and colleagues are still studying the data and tweaking how the store operates and what it sells, and that there will be more 4-Stars coming, maybe even to a strip mall near you.

And here’s what you need to know in global technology news

Amazon will start selling Apple products, but with a catch. Amazon will shut down unauthorized third-party sellers hawking Apple gear on its site.

Alibaba set a new record on 11/11. As Chairman Jack Ma heads toward retirement, the company’s Singles Day shopping extravaganza was the biggest ever.

SAP is buying Qualtrics for $8 billion in cash. The German software giant swooped in to make its largest-ever deal as the startup was on the precipice of an initial public offering.

Facebook got a hand from Uncle Sam in combatting election misinformation. The company is getting help from the FBI and DHS.

A startup not run by a billionaire launched a rocket into low orbit. At a spaceport in New Zealand on Sunday, Rocket Lab sent up six satellites in a vessel dubbed It’s Business Time.

Get ready for the folding phone. Samsung will make at least a million and start selling them early next year.

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